Global Arab Network | Positive momentum - Tunisian economy edging forward

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Positive momentum - Tunisian economy edging forward

Global Arab Network - - Mohammed Almasri

Thursday, 13 October 2011 01:22

http://www.english.globalarabnetwork.com/images/stories/2009/Sep/sports_city_tunisia_tunis-.jpg

Global Arab Network - Following a turbulent start to the year, which saw the previously robust North African economy contract, Tunisia is looking to regain a sense of positive momentum.

Tunisia has seen steady growth in recent years, benefitting from a diversified export base and strong infrastructure networks, and while August estimates from the African Development Bank (AfDB) have suggested GDP rates could touch 0.7% by the end of the current year, the finance minister, Jalloul Ayed, stated in early September that the Tunisian economy could remain in negative territory until the end of 2011, a contrast to the 3.7% expansion of GDP recorded in 2010.

“Growth is not going to be very good,” Ayed told Reuters. “We were hoping for the GDP growth rate to be between zero and 1% and it looks like now there is a possibility that it could be negative. But it all depends on how the economy will perform in the second half of the year.”

Separately, Abdelhamid Triki, the minister of planning and international cooperation, acknowledged at the end of August that tourism and energy revenues were well below average but pointed out that industrial production and investments were beginning to rebound, fuelling hopes for a stronger economic performance leading into 2012.

Early September saw the central bank’s advisory council lower its key interest rate by 50 basis points to 3.5%, the second such reduction since the end of June, in a bid to spur domestic spending and stimulate additional capital flows.

“To boost economic activity and the implementation of investment plans by limiting the financial burden on businesses, the Council decided to reduce, again, the rate of the Central Bank of Tunisia (the Banque Centrale de Tunisie, BCT) half a percentage point to bring it back to 3.5%,” the bank said in a statement announcing the move.

Tunisia’s external sector has also been affected by the political unrest in other North African countries – none more clearly than the violence in Libya, which has been eroding visitor numbers and trade. The ongoing debt crisis in the eurozone, Tunisia’s main tourism and export market and the source of much of its foreign direct investment (FDI), also had a noticeable impact on tourism figures and export flows. The cautious approach of overseas tourists and investors has drained away much of the flow of foreign revenue into the economy, but it is likely the tide will return as confidence builds.

Tunisia’s rankings in the World Economic Forum’s (WEF) Global Competitiveness Report have fallen as a result of the unrest and the slow recovery, but it retains its rating as the most competitive economy in Africa, 10 rungs above the continent’s next ranked country – South Africa. In its latest comparative study of the world’s economies, the WEF ranked Tunisia 40th overall, down eight places on the global ladder from its performance in the previous two years.

One of the biggest problems the country must confront is unemployment; official estimates put the number of jobless at around 700,000, Ayed said in late September. To help get people back to work, Tunisia is seeking $125bn in funding over the next five years to assist in development projects and to create new employment opportunities. At least some of this backing will come from the International Monetary Fund, the World Bank and the African Development Bank, as well as via bilateral agreements.

Speaking ahead of the September 12 meeting of finance ministers and funding agencies in Marseille, which ultimately saw $38bn pledged to Tunisia, Egypt, Morocco and Jordan to strengthen their economies and help with the transition to democracy, Ayed said it was vital that promises be delivered on.

“Part of managing expectations is that there will be some pledges from the donor countries, from the financial institutions, more than just another statement of goodwill,” Ayed said. “We’re not asking for gifts. What we’re saying is that there will be some great opportunities in terms of investment in our country.”

Should the promised assistance be forthcoming, and parliamentary elections scheduled for October 23 pass off smoothly and a government is formed soon after, Tunisia should be in a good position to build on existing foundations and quickly return to solid economic growth. (OBG)

Global Arab Network

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